Eight Tips for Becoming a Smart Spender


When it comes to beefing up your finances, it’s not all about having a solid savings plan. You also must know how to spend money wisely.

If there was a silver lining to the Great Recession, it was that it forced consumers to be more cautious with their spending. The Bureau of Labor Statistics reports that in 2010, consumers slashed spending by more than 2% compared to 2009. Consumers cut back on entertainment by 7% and food and dining  by 3.8%. Limiting discretionary spending is always a budget helper, but experts say it has to go reducing spending to make a significant impact.

“Being a better spender is easy if you follow two simple guidelines: what you pay for is often what you get, and the brand you buy, and buy from, matters,” says Denise Winston, a financial educator and founder of MoneyStartHere.com.

Several factors play into whether a purchase is worth the money. Some are subjective: how much will the purchase contribute to your enjoyment? How much will you use it? While others are more quantitative: do you have the money available to buy it now? Is the item of good, lasting quality?

Here are eight ways to help evaluate the big picture when making any purchase and make you a smarter spender:

Wait three days to make a purchase. Waiting to make a big purchase controls impulse, says Paul Markowich, a senior financial planner at Firstrust Financial Resources in Philadelphia. “Ask yourself after you removed yourself emotionally from the purchase whether or not you really need it.”

Shop around. Get at least three price estimates on every mid- to big ticket item, Winston advises. Use cell phone apps like ShopSavy search to shop for the best price and ask retailers to match the price of competitors.

Only use cash.  “If you need to use credit to afford it, don't buy it,” Markowich says. “Plastic cards have made spending easier, but it has also disguised how much we really spend. Seeing the cash and holding it will change your spending patterns.”

If you have the cash to cover the purchase, but want the protection a credit card offers, then it is fine to swipe the card—but make a full payment as soon as the bill arrives.

Determine cost per use. “When it comes down to deciding whether a purchase is worth the money, you need to think about how often you are going to use [it],” says Jessica Patel, personal finance editor for Bankrate.com.

For example, spending more on clothing basics is important so they last, since buying replacements of a low-quality item can be more expensive in the long run. “For men, one high-quality suit is always worth the money, preferably in black or grey so they can use it for multiple occasions and seasons.” But will you use that ski equipment enough to make renting it more expensive per trip? If not, forgo the purchase.

Buy from a trusted retailer. “If the price seems too good to be true it probably is, and could be a fake or scam,” Winston says. Stick to purchasing from reputable retailers, read product reviews, and check warranty policies. Know the return policy and watch out for restocking fees that could make returns a wash (culprits include cell phones and electronics).

Many retailers offer a 30-day low price guarantee so if you find a better price elsewhere after making a purchase bring back your receipt and hold the seller to it.

Do your brand homework. Know the manufacturer's reputation, warranty guidelines and always save your receipt, advises Winston. For example, Winston wears $300 Maui Jim sunglasses for extraordinary quality, good resale value, reputation and warranty. And she buys them from Sunglass Hut because they offer free shipping both ways, free adjustments, a 90-day return policy, and $20 off birthday coupons. When she accidentally broke the shades, Sunglass Hut shipped the glasses for repair for free and for $10, Winston got a perfectly restored pair of sunglasses.

Buy used or slightly distressed. Buying an item used could save up to 70%. Check Craigslist, eBay and local thrift and restores. And don't overlook slightly damaged goods—just be sure to ask exactly what is wrong with a product. “A washer or dryer with a ding in the paint or dent on the side still works the same but can be had at a fraction of the price,” Winston says.

Clean house before each season. “Your forgotten treasures may satisfy your cravings and prevent you from purchasing something new,” Markowich explains. You may also be able to repurpose items and make them feel new again.